Charts and Market Updates April 24, 2020

Charts and Market Updates April 24, 2020

EURNZD

The Reserve Bank of New Zealand is proposing to remove loan-to-valuation restrictions (LVRs) on mortgage lending. This is in order to help banks to keep lending to support customers, including with mortgage deferral. The weakening labor market will be the country’s main driver for this. This is especially true after local house prices took a 10 percent hit over the remainder of the year.

Meanwhile, the market thinks the Eurozone is suffering its worst economic slowdown yet. The European Commission apologized to Italy for the EU’s underwhelming response to coronavirus. It resulted in this week’s weak German and Euro Manufacturing PMI, as well as the French Markit Composite PMI. This all happened in the month of April. The figures also outweigh the higher-than-expected ZEW Economic Sentiment in Germany. Because of this, the market expects the kiwi to perform better than the euro in the near future.

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AUDNZD

The Reserve Bank of Australia claimed the region is heading towards its biggest economic shock since the 1930s Great Depression. The ABS confirmed 780,000 job losses in the region within three weeks of lockdown. This prompted the central bank to hold a televised speech to warn “record declines in economic activity” over the upcoming months. Analysts, therefore, expect the nation’s economic output to fall by about 10 percent. The total number of hours worked will be dropped by 20 percent.

Meanwhile, its cousin is already making moves against its lesser job count: the Reserve Bank of New Zealand is proposing to remove loan-to-valuation restrictions on mortgage lending, using the average citizen’s earnings as a basis for buying new houses in the country. Both figures will push the NZD up against the AUD exponentially for the next coming months. This is at least until Australia manages to see hints of positive news during that time.

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EURBRL

Oil-dependent Brazil just saw a fresh all-time low across the board on Thursday as markets believe that a rebound in oil prices is nowhere in sight following this week’s plunge in crude. In fact, investors have been betting on the decline for months as the coronavirus drove away demand for the commodity. The Brazilian real was hit the hardest year-to-date, down by 36%. Commodity currencies like BRL are to see declines throughout the coronavirus economy against those who aren’t, even against slowing economies such as Europe.

In fact, even though the eurozone reported weaker-than-expected figures in Germany, as well as another lower figure month-over-month for waits Ifo Business Climate Index, the Brazilian real might only see a only little gain over the single currency. Other oil-dependents will have to wait for worse news from their opposing currencies to see higher gains against them.

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GBPBRL

As opposed to its neighboring countries in Europe, the UK is constantly seeing higher than expected economic figures this week. However, everything turned around yesterday when it reported from 10 to more than 40 percent losses on Composite, Manufacturing, and Services PMI figures. One of the few, but impactful, reasons why the markets will root for the British pound is their engagement on oil and how it affects its corresponding countries.

The Brazilian real performed the worst in the commodity currencies market with a 36% decline. This is following the unprecedented conflict between Saudi Arabia and Russia overproduction and oversupply. It resulted in crashing oil prices to record lows this week. Although said prices managed to recover, dependent countries are expected to crash as the market barely sees any need for the commodity due to the coronavirus lockdowns worldwide. 

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